Alternative Fuels for Shipping: Optimising Fleet Composition Under Environmental and Economic Constraints

The shipping sector is likely to go through a fuel transition in the coming decades as a result of the increasing regulation and the commitment of part of the ship-owning community to reduce its environmental impact. If shipping is to limit its greenhouse gas emissions so that global warming is maintained below 2°C as agreed by the IMO in April 2018 and in line with 2015 Paris Agreement, urgent action is needed in terms of environmentally friendly technologies uptake, operational measures and new forms of propulsion based on alternative fuels. While some research has appeared in the last decade on operational and technological measures aimed at reducing emissions for shipping, limited focus has been put on the economic and environmental impacts of a fuel shift. This research aims at analysing the alternative fuel options available for shipping and assess the emission reductions obtainable through a fuel shift. The paper also provides insights on the costs associated with such fuel transition. Through the development of a simulation based on existing information of alternative fuel costs and availability, the paper shows that a maximum of 24% greenhouse gas emission reduction can be achieved by using alternative fuels. Such reduction, however, can be obtained at varying cost levels. An optimal fleet mix is provided for 2050 as guidance for policy makers and the shipping sector.